State agencies on the chopping block

Gov. Mitch Daniels is struggling to avoid raising taxes on the already hard-hit Hoosier residents, but disappointing state revenue is forcing him to cut each state agency’s spending by 10 percent.

October saw the fourth-straight month of revenue that failed to meet the forecast amount for fiscal year 2010, which began in July. Total tax collections for October fell $46 million below the forecast, bringing total state revenue $309 million, or 7.4 percent, below the expected number.

Daniels had already cut agency budgets by 5 percent in July, but upped the reduction to 10 percent on Nov. 6.

On top of that, state employees will not receive a pay increase for the second year in a row, and agencies are offering voluntary unpaid leave for the rest of the fiscal year. State capital projects will be deferred, and certain dedicated funds will be redirected to the general fund.

Daniels’ cost-saving measures were implemented to avoid raising taxes, something other states have already done, and to prevent the need to dip into the state reserves, which totaled $1.3 billion at the end of last fiscal year.

Without these spending cuts, the governor’s office said the reserves will have dried up by next August.

These latest cuts should save the state $300 to $400 million over the next two years, the governor said.

So individual state agencies are finding all sorts of ways to cut costs; some are renegotiating contracts, some are condensing office space and others are cutting staff.

Here’s a look at how a few agencies are making the cut.

Department of Corrections
Original 2009-10 state appropriation: $600 million
Current 2009-10 state appropriation: $540 million

Up until a few weeks ago, the Department of Correction’s payroll system automatically paid its employees five hours’ overtime. With a new method of keeping correct track of actual clocked hours, spokesman Doug Garrison said the agency will save about $5 million.

In addition, all new facilities and expansions have been delayed. The department was planning new facilities in Miami and Wabash, which Garrison said are still needed. The state is lacking beds for offenders, and the number of inmates is growing by 4 percent each year. There hasn’t been a new facility in six years.

“The commissioner has said before that, in a number of ways, that we’re bulging at the seams,” Garrison said. “We’re near crisis levels.”

Garrison said the agency is still looking at ways to cut costs, including to what extent the furlough program will be used by staff.

“We’re doing our best with what we have.”

Indiana Arts Commission
2009 state appropriation: $3.75 million
2010 state appropriation: $2.9 million

Though Daniels reduced all state agency budgets, the Indiana Arts Commission is still waiting on further word before it decides where to cut.

Unlike other state entities, the Arts Commission is governed by a 15-member board that makes all final decisions. Executive director Lewis Ricci said the commission might not know until mid-December what their specific cuts will be.

But Miah Michaelsen, staff liaison for the Bloomington Community Arts Commission, said arts programs around the community will no doubt be affected by the cuts.

Though the Bloomington Commission is self-funded, Bloomington does receive money from the state commission through grants. Michaelsen said there’s a chance the grants already awarded might not receive the full amount.

“We may be called upon to help fill the gap,” she said. “There’s no doubt it will affect us. We kind of have a wait-and-see attitude right now. It’s going to have ramifications on us.”

Department of Child Services
2009 state appropriation: $193 million
2010 state appropriation: $184.8 million

The Dept. of Child Services is committed to keeping all of their case workers and staff, so spokeswoman Amy Miller said the department is looking into administrative reductions like travel expenses and supply costs.

“We’re having conversations with partners to see if there are any ways we can cut costs there,” she said. “But first and foremost we want to keep children safe.”

Family and Social Services Administration
2009 state appropriation: $1.9 billion
2010 state appropriation: $1.87 billion

Internal cuts will total $13.6 million for the Family and Social Services Administration’s required reduction.

Spokesman Marcus Barlow said the agency is co-locating offices, meaning they’ll use one office for two different purposes. They’ll also be renegotiating contracts with vendors and reducing Medicaid reimbursements by 5 percent. Because hospitals who treat Medicaid patients sometimes aren’t reimbursed completely now, the reduction could potentially bring up problems.

But Barlow said hospitals are unique in the supplemental payments they receive; he said they can recover 75 percent of the reductions through the federal government.

“In the last few years, when times were good, we have done a lot to increase the amount hospitals receive in Medicaid reimbursement,” he said. “But now we have to cut back a little bit.”

Department of Education
2009 public school appropriation: $5.9 billion
Scheduled 2010 public school appropriation: $6.5 billion 

Luckily, public school funding comes directly from the state, so the latest budget reductions within the Department of Education won’t affect Indiana’s schoolchildren. But department spokesman Cam Savage said reduced state revenue could potentially affect the promised appropriations to each school.

While the department is reducing office space to meet budget, which will save $2 million over the next 10 years, Savage said schools receive 48 percent of state revenue, and the legislature voted for a 1.1 percent funding increase this past year.

“Because it’s half of the budget, we’ve encouraged schools to be mindful that if state revenue continues to come in below estimates, that it’s possible schools may not get that increase the legislature voted for them this year,” Savage said. “That decision hasn’t been made yet. This is a time when state revenue is not meeting expectations and we’re one of few states that have not cut education. We hope not to have to.”

The Monroe County Community School Corporation is already suffering from previous funding hits based on decreased enrollment. Tim Thrasher, comptroller or financial supervisor, said the corporation lost about $130,000 this year when enrollment fell by almost 300 students. Coupled with the fact that schools might not receive their full funding this year, Thrasher said the school system is struggling.

“We’ll need to reduce our expenditures by at least $2 million a year, and our general fund budget is 90 percent personnel salary and benefits,” he said. “When we need to make cuts of that magnitude, we don’t have much choice but to reduce our staff.”

Thrasher said the new charter school Bloomington Project accounted for about 100 of the lost students, but the corporation is still trying to account for the rest of the missing students.

As for the staff reduction, Thrasher said a lot can be done through retirements and resignations.